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Author: Pengyu Wei
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
This paper analyzes the optimal consumption and portfolio choice problem for an ambiguity averse investor who has access to the stock and derivatives markets with recursive preferences. The stock process follows a stochastic volatility jump-diffusion model and the investor can have different levels of ambiguity about diffusion risks and the jump risk, respectively. We obtain an analytical solution which is exact when the investor has unit elasticity of intertemporal substitution of consumption, and approximate otherwise. We find that optimal exposures to diffusion risks and to the jump risk are significantly affected by the ambiguity aversion about the corresponding risk factors in the complete market. However, the optimal stock investment is insensitive to the ambiguity aversion about the jump risk in the incomplete market. We also find that considering ambiguity aversion with respect to diffusion risks and participating in the derivatives markets are essential to reduce the potential welfare loss, while the impact of ignoring the jump ambiguity is negligible.
Author: Pengyu Wei
Publisher:
ISBN:
Category :
Languages : en
Pages : 42
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Book Description
This paper analyzes the optimal consumption and portfolio choice problem for an ambiguity averse investor who has access to the stock and derivatives markets with recursive preferences. The stock process follows a stochastic volatility jump-diffusion model and the investor can have different levels of ambiguity about diffusion risks and the jump risk, respectively. We obtain an analytical solution which is exact when the investor has unit elasticity of intertemporal substitution of consumption, and approximate otherwise. We find that optimal exposures to diffusion risks and to the jump risk are significantly affected by the ambiguity aversion about the corresponding risk factors in the complete market. However, the optimal stock investment is insensitive to the ambiguity aversion about the jump risk in the incomplete market. We also find that considering ambiguity aversion with respect to diffusion risks and participating in the derivatives markets are essential to reduce the potential welfare loss, while the impact of ignoring the jump ambiguity is negligible.
Author: Marcos Escobar
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
The problem of optimal portfolio choice is solved, in closed form, for an ambiguity averse investor who has access to stock and derivatives markets. The investor can have different levels of uncertainty about models for stock return and its stochastic volatility. Although both types of ambiguity considerably impact the optimal portfolio, we show that stock return ambiguity is more significant for stock allocation whereas volatility uncertainty has larger influence on derivatives trading. As expected, investors with no access to derivatives would not have additional losses from ignoring volatility uncertainty. Access to derivatives market substantially improves portfolio performance and increases welfare loss from neglecting either type of ambiguity. Interestingly, the loss from ignoring ambiguity could be as much as the loss from not trading the derivatives.
Author: George Chacko
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the optimal consumption and portfolio-choice problem of long-horizon investors who have access to a riskless asset with constant return and a risky asset (quot;stocksquot;) with constant expected return and time-varying precision-the reciprocal of volatility. Markets are incomplete, and investors have recursive preferences defined over intermediate consumption. The paper obtains a solution to this problem which is exact for investors with unit elasticity of intertemporal substitution of consumption and approximate otherwise. The optimal portfolio demand for stocks includes an intertemporal hedging component that is negative when investors have coefficients of relative risk aversion larger than one, and the instantaneous correlation between volatility and stock returns is negative, as typically estimated from stock return data. Our estimates of the joint process for stock returns and precision (or volatility) using U.S. data confirm this finding. But we also find that stock return volatility does not appear to be variable and persistent enough to generate large intertemporal hedging demands.
Author: 葛蕾
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 79
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Book Description
Author: George Yin
Publisher: Springer
ISBN: 3030254984
Category : Mathematics
Languages : en
Pages : 599
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Book Description
This volume collects papers, based on invited talks given at the IMA workshop in Modeling, Stochastic Control, Optimization, and Related Applications, held at the Institute for Mathematics and Its Applications, University of Minnesota, during May and June, 2018. There were four week-long workshops during the conference. They are (1) stochastic control, computation methods, and applications, (2) queueing theory and networked systems, (3) ecological and biological applications, and (4) finance and economics applications. For broader impacts, researchers from different fields covering both theoretically oriented and application intensive areas were invited to participate in the conference. It brought together researchers from multi-disciplinary communities in applied mathematics, applied probability, engineering, biology, ecology, and networked science, to review, and substantially update most recent progress. As an archive, this volume presents some of the highlights of the workshops, and collect papers covering a broad range of topics.
Author: Robert A. Meyers
Publisher: Springer Science & Business Media
ISBN: 1441977007
Category : Business & Economics
Languages : en
Pages : 919
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Book Description
Finance, Econometrics and System Dynamics presents an overview of the concepts and tools for analyzing complex systems in a wide range of fields. The text integrates complexity with deterministic equations and concepts from real world examples, and appeals to a broad audience.
Author: Lars Peter Hansen
Publisher: Princeton University Press
ISBN: 0691170975
Category : Business & Economics
Languages : en
Pages : 453
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Book Description
The standard theory of decision making under uncertainty advises the decision maker to form a statistical model linking outcomes to decisions and then to choose the optimal distribution of outcomes. This assumes that the decision maker trusts the model completely. But what should a decision maker do if the model cannot be trusted? Lars Hansen and Thomas Sargent, two leading macroeconomists, push the field forward as they set about answering this question. They adapt robust control techniques and apply them to economics. By using this theory to let decision makers acknowledge misspecification in economic modeling, the authors develop applications to a variety of problems in dynamic macroeconomics. Technical, rigorous, and self-contained, this book will be useful for macroeconomists who seek to improve the robustness of decision-making processes.
Author: Cheng-Few Lee
Publisher: Springer
ISBN: 1493994298
Category : Business & Economics
Languages : en
Pages : 655
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Book Description
This rigorous textbook introduces graduate students to the principles of econometrics and statistics with a focus on methods and applications in financial research. Financial Econometrics, Mathematics, and Statistics introduces tools and methods important for both finance and accounting that assist with asset pricing, corporate finance, options and futures, and conducting financial accounting research. Divided into four parts, the text begins with topics related to regression and financial econometrics. Subsequent sections describe time-series analyses; the role of binomial, multi-nomial, and log normal distributions in option pricing models; and the application of statistics analyses to risk management. The real-world applications and problems offer students a unique insight into such topics as heteroskedasticity, regression, simultaneous equation models, panel data analysis, time series analysis, and generalized method of moments. Written by leading academics in the quantitative finance field, allows readers to implement the principles behind financial econometrics and statistics through real-world applications and problem sets. This textbook will appeal to a less-served market of upper-undergraduate and graduate students in finance, economics, and statistics.
Author: Cheng-Few Lee
Publisher: Springer Science & Business Media
ISBN: 0387771174
Category : Business & Economics
Languages : en
Pages : 1700
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Book Description
Quantitative finance is a combination of economics, accounting, statistics, econometrics, mathematics, stochastic process, and computer science and technology. Increasingly, the tools of financial analysis are being applied to assess, monitor, and mitigate risk, especially in the context of globalization, market volatility, and economic crisis. This two-volume handbook, comprised of over 100 chapters, is the most comprehensive resource in the field to date, integrating the most current theory, methodology, policy, and practical applications. Showcasing contributions from an international array of experts, the Handbook of Quantitative Finance and Risk Management is unparalleled in the breadth and depth of its coverage. Volume 1 presents an overview of quantitative finance and risk management research, covering the essential theories, policies, and empirical methodologies used in the field. Chapters provide in-depth discussion of portfolio theory and investment analysis. Volume 2 covers options and option pricing theory and risk management. Volume 3 presents a wide variety of models and analytical tools. Throughout, the handbook offers illustrative case examples, worked equations, and extensive references; additional features include chapter abstracts, keywords, and author and subject indices. From "arbitrage" to "yield spreads," the Handbook of Quantitative Finance and Risk Management will serve as an essential resource for academics, educators, students, policymakers, and practitioners.
Author:
Publisher:
ISBN:
Category : Futures
Languages : en
Pages : 788
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Book Description
